Ed Schuck, Fidato principal, said while the MSCI data indicates NZ wholesale funds own about $1.7 billion of private real estate assets, the index figure “does not capture all commercial property in NZ”.

“Many investors hold commercial property but do not supply information on their holdings to MSCI,” Schuck said. “But I would think that the $1.7bn figure is a pretty good estimate of the private real estate held by unlisted wholesale funds in NZ.”

Australian wholesale funds own almost half of the A$148 billion of properties included in the MSCI database, the Fidato report says.

“In contrast to the situation overseas, anecdotal evidence suggests that it is common for wholesale investors in New Zealand to have material exposures to public real estate securities, but negligible exposure to private securities,” the study says.

The Fidato report says liquidity concerns and lack of suitable products have likely restrained New Zealand wholesale investors from allocating more to private real estate assets.

Aside from “defined contribution schemes [including KiwiSaver schemes] and some insurers”, the comparative illiquidity of private real estate holdings should not be a problem for NZ wholesale investors, the study says.

“The relatively small number of products is likely to be a shortcoming of the private real estate asset class in New Zealand in the eyes of wholesale investors,” the Fidato report says.

“… the lack of product choice will only be alleviated by fund managers bringing new products to market to meet investor demand,”

Just two open-ended private real estate funds – offered by Fisher Funds and Trust Investments – are currently available to NZ wholesale investors, Fidato says, with a handful of smaller open-ended funds, including Vinta, recently coming to market.

The Australian-headquartered Vinta launched a $121 million direct property wholesale fund last week, seeking about $80 million from new investors with three Wellington commercial properties forming the seed assets.